Carnival held its annual meeting this morning at a hotel on Miami Beach. But today was different from the usually dull, self-serving pontificating by cruise line executives when a group demanding that Carnival pay its fair share of taxes appeared on the scene.

An organization called "1Miami" challenged Carnival and its CEO Micky Arison to pay their "fair share" of taxes. Their presence caused an uproar with shareholders yelling at the protesters to be quiet and CEO Arison apologizing for the clamor.

Cruise lines avoidance of taxes is one of my favor topics. Cruise lines like Carnival are registered in Panama to escape U.S. taxes. According to the New York Times, Carnival paid taxes of only 1.1 percent of their $11.3 billion in profits over the last five years. The issue is a hot one after Senator Rockefeller grilled cruise line executives at a Senate hearing last month why cruise lines use some 40 federal agencies yet avoid all U.S. taxes by registering their businesses and ships in places like Liberia and the Bahamas.

The "controversy" was caused by the 1Miami grass roots organization simply asking Carnival to pay its fair share of taxes and help keep Miami afloat.

The Miami Herald reported Carnival's claim that it pays "head taxes" to ports around the world. But this is hardly true; its the passengers who pay the port taxes. Carnival just acts as a middle man. The Herald also writes that CEO Arison found the tax questions "insulting."

Ah, a raw nerve. Arison is very touchy about the issue of taxes. This is probably because he is the richest person in Florida. And probably because of some slick and embarrassing tax maneuvering by his father, Ted Arison.

Carnival was created by the senior Arison in the 1960's. He raked in tens of billions of dollars from tax paying U.S. passengers, exploited the hell out of Caribbean crew members, and lived the good life in Miami. But he registered his Miami-based cruise line and his cruise ships in Panama to avoid U.S. taxes. In 1990, he abandoned Miami, denounced his U.S. citizenship, and returned to Israel with his billions in a ploy to avoid estate and inheritance taxes.

Carnival should have seen the protesters coming from a mile away.

Earlier in the week the 1Miami group protested about Carnival's non-payment of taxes while in small boats next to Arison's super yacht, the 200 foot Feadship Mylin IV, at the Miami Beach marina.

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Rich57 -
April 12, 2012 11:00 AM

Jim, your position is valid up to a point. Remember though, that taxes are ultimately paid by a company's customers. If Carnival Corp. were suddenly subject to the 35% US tax on corporations it is reasonable to expect a fare increase of around 35% to cover the new expense. The fare increase might not occur immediately or in a single step, but fares would certainly rise significantly over time. Many of Carnival's core customers, middle income Americans, could easily be priced out of the market. Could Carnival's business model collapse altogether? I don't pretend to know the answer to that, but I see it as a possibility.

The second thing worth noting is that ships can change locations. If the US imposes high taxes on the cruise lines, fewer cruises from US ports are likely to be offered. The Bahamas are easily accessible from the Eastern USA. I would look for construction of a large new home port there if US taxes on these companies increase significantly. Not to mention the move offshore of Corporate Headquarters with a resulting loss of US jobs.

Some people may not like the cruise line tax situation as it stands. But I believe we are stuck with it, for better or worse.

Steve Smith -
July 6, 2012 9:22 PM

Rich makes a very good point. Economics 101 teaches that Corporations do not pay taxes, their customers do.

This is something that surely a Rockefeller ( with their billions) would understand.

And I have to say that obviously, Carnival Corporation has not broken the law. When did it become a crime to abide by the tax law of the land?

When I fill out my income tax, I take all the LEGAL deductions that I am allowed. That does not make me a bad person.

Carnival Corporation is simply following the law and if a billionaire Rockefeller does not like that...then they should change the law.

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"Everything the cruise lines don't want you to know" is the motto of this award winning maritime law blog authoredMore...

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